Chinese Leaders Worry Inflation May Fuel Unrest

SOARING inflation in China is hitting urban residents in the pocketbook and thus making government leaders jittery.

In recent weeks, Beijing's ruling communists have openly expressed concern that economic reforms and their accompanying price increases are threatening social stability. During the annual two-week meeting of China's nominal parliament, which convened on March 10, divisions over market-style reforms have erupted among the communist leadership.

Addressing legislative deputies this week, Zhu Rongji, deputy prime minister and economic czar, rejected contentions that reforms are propelling inflation as a ``gross misunderstanding,'' according to the New China News Agency. ``We are in a better position now to fight the price gyration than in the late 1980s,'' Mr. Zhu was quoted as saying. He is also governor of the central People's Bank of China.

Still, the leadership frets that the inflationary spiral could fuel political unrest and plunge China into a repeat of the 1989 turmoil. Last year, the government lifted nearly all price caps, driving up inflation to 23 percent in major cities.

But this week, Beijing reimposed temporary price ceilings on wheat flour, rice, eggs, milk, and other products and signaled that it would undertake ``appropriate interference'' in the consumer goods market, according to the official Economic Daily. The newspaper insisted the caps did not mean an end to price reforms.

Finance Minister Liu Zongli reported to the parliament that the 1993 budget deficit of $2.35 billion is expected to more than triple this year. In addition to other economic reforms, the government's decision to abolish a dual-currency system at the start of this year will force the government to pay out higher salaries and subsidies, he said.

Beijing's financial squeeze is complicated by regional resistance to a new tax system, a revenue-sharing scheme with local governments, and a profit distribution system for state-owned enterprises. Mr. Liu urged local governments to improve tax collection and end evasion, fund government payrolls and reserves to buy farmers' crops, and cut fixed-asset investment.

Government salary increases, slated for April 1, have helped buffer some urban residents against inflation. But many struggle to make ends meet.

Chen Ziqin, for example, says he sells socks, underwear, and cloth shoes in an evening street market to supplement his $25 monthly pension. ``I can't expect to make a lot of money here,'' he says. ``But a little extra pocket money helps.''